Silicom Ltd. (NASDAQ:SILC) Q4 2019 Earnings Conference Call January 29, 2020 9:00 AM ET
Shaike Orbach – Chief Executive Officer
Eran Gilad – Chief Financial Officer
Ehud Helft – GK Investor Relations
Conference Call Participants
Alex Henderson – Needham & Company
Ethan Etzioni – Etzioni Portfolio Management
Ladies and gentlemen, thank you for standing by. Welcome to the Silicom’s Fourth Quarter and Full Year 2019 Results Conference Call. All participants are present in a listen-only mode. Following management’s formal presentation, instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded.
You should have all received by now the company’s press release. If you have not received it, please contact Silicom’s Investor Relations team at GK Investor and Public Relations at 1-646-688-3559 or view it in the news section of the company’s website www.silicom-usa.com.
I would now like to hand over the call to Mr. Ehud Helft of GK Investor Relations. Mr. Helft, would you like to begin.
Yes, thank you operator. I would like to welcome all of you to Silicom’s fourth quarter and full year 2019 results conference call. Before we start, I’d like to draw your attention to the following Safe Harbor statement. This conference call contains projections or other forward-looking statements regarding future events or the future performance of the company.
These statements are only predictions and may change as time passes. Silicom does not assume any obligation to update that information. Actual events or results may differ materially from those projected, including as a result of our increasing dependency for substantial revenue growth on a limited number of customers in the evolving cloud-based, SD-WAN, NFV and Edge markets.
The speed and the extent to which solutions are adopted by these markets, the likelihood that we will rely increasingly on customers which provide solutions in these evolving markets, resulting in an increasing dependence on a smaller number of larger customers, difficulty in commercializing and marketing Silicom’s products and services, maintaining and protecting brand recognition, protecting of intellectual property, competition and other factors identified in the documents filed by the company with the SEC.
In addition, following the company’s disclosure of certain non-GAAP financial measures in today’s earnings release, such non-GAAP financial measures will be discussed during this call. Such non-GAAP measures are used by management to make strategic decisions, forecast future results and evaluate the company’s current performance.
Management believes that the presentation of these non-GAAP financial measures is useful to investor understanding and assessment of the company’s ongoing co-operations and prospects for the future. Unless otherwise stated, it should be assumed that financials discussed in this conference call will be on a non-GAAP basis.
Non-GAAP financial measures disclosed by management are provided as additional information to investors in order to provide them with an alternative method for assessing our financial conditions and operating results. These measures are not in accordance with or a substitute for GAAP. A full reconciliation of non-GAAP to GAAP financial measures is included in today’s earnings release, which you can find on Silicom’s website.
Now with us on the line today are Mr. Shaike Orbach, CEO; and Mr. Eran Gilad, CFO. Shaike will begin with an overview of the results, followed by Eran who will provide the analysis of the financials. We will then turn over the call to the question-and-answer session.
And with that, I would like now to hand the call over to Shaike. Shaike, please.
Thank you, Ehud. I would like to welcome all of you to our conference call to discuss the results of the fourth quarter and full year, capping off 2019. We are happy with the results of the quarter. We grew revenues over the prior quarter by 6% and we continue to generate ongoing profitability and cash.
We reported revenue of $25.5 million, which was in line with our expectations for the quarter. We reported $3.1 million in net profit, growing by 21% over that of the previous quarter. We continue to generate cash and ended the year with a record of $90 million in total cash with no debt.
Our strong cash position continues to give a significant financial flexibility and enables us to pursue any opportunities that may arise, whether through internal R&D investment or through external acquisitions.
Our year-end shareholders equity standing as $163 million is as a result of our 15 years of ongoing and continued profitability, while successfully navigating through the many market cycles and correctly investing in the right areas to capitalize on the various technology trends over that, all that time.
I want to spend a few moments talking about the evolution of Silicom from a company focused purely on networking appliances five years ago, into what we’re doing today, that of a company at the epicenter of the Cloud era and Telco Edge computing, providing solutions to fast growing markets such as SD-WAN, NFV, Security and 5G.
Five years ago we were seeing strong sales of our product to un-promised data centers. This was driven by the strong industry tailwinds, especially from the Cyber Security and WAN optimization markets. At the time however, we began to see a new direction in which networking technology was headed and we made the decision to invest resources to remain ahead of the curve and to remain highly competitive.
In 2014 and 2015 we made two acquisitions of IP and technology. One of the acquisitions was a company with a deep expertise in FPGA based networking smart card, bringing us key new technological capability. The second was a company that developed Edge computing devices, enabling us to penetrate new markets, particularly SD-WAN and NFV within Telco’s and OEMs.
Over the five year since, our markets and Silicom have indeed transitioned. We continue to grow our business despite headwinds from our more traditional end markets that begun to flatten and even decline. Our new markets began to contribute and we started to achieve design wins from new customers.
As we entered 2020, Silicom’s transition is about to be complete and the new end market we are focused on are on the verge of mass deployment. We see the market transitioning in two dimensions. First, the market is transitioning and ramping from proprietary combined hardware and software solutions to generic hardware, white box solutions of which our Edge products are a critical component.
This is particularly happening in the Telco space, which has been our focus for quite some time, as well as in the enterprise segment, which we believe will also become a significant contributor to our growth in the future.
And the second is the transition to the Cloud data centers and visualize Edge computing. For this we mainly develop FPGA-Based Smart NICs. There are therefore a number of strong market tailwinds which we see will drive forward for the coming years and these are from SD-WAN, NFV, Cloud data centers, Cyber Security and other networking and Telco related sectors. I therefore believe we are close to the point for a return to a solid double digit compounded average growth rate period, enjoying the strong fruit of our previous investments over the coming years.
Already starting in 2020, we will begin to benefit from both the recent wins in the SD-WAN space, combined with the early revenues from our FPGA related wins, which altogether we believe will be translated into strong revenue growth. At the moment based on existing customer forecasts, as I discussed last quarter, our expectations are for revenues between $120 million and $128 million for 2020, representing 18% growth over 2019 at the midpoint.
Looking ahead to 2021, I believe our growth will be even more accelerated as wins related to our FPGA technology will mature as well.
The key for us is to secure more design wins, which can further accelerate our growth, and we are indeed doing just that. Just a few weeks ago we recorded a significant Edge SD-WAN win, one of the U.S.’s largest healthcare chains selected our latest generation CPE’s as a high performance platform for its new generation or for its new organization wide SD-WAN based network.
Our capabilities were brought to the customer’s attention by SD-WAN software vendor, a leading SD-WAN industry player which qualified our latest generation CPE’s as part of its worldwide strategy.
Before making its decision, its selection, the customer ran a side-by-side comparison of our performance against that of our major competitor. Our win is a clear demonstration of the excellence and superiority of our technology. Revenues from the first phase of the project, which will roll out the network during this year and through mid-2021 are expected to reach approximately $6 million.
Furthermore, this giant customer can potentially open the door to additional opportunities. Equally important, our participation in this project is strengthening our relationship with our SD-WAN software partner and the projects integrator, both important network industry players.
This win also demonstrates how our strategy is working. While cooperating with the software vendors and OEMs is still the main focus of our strategy towards the enterprise part of the market, we see that some big enterprises such as our customer in this specific win get themselves involved in the selection process. This potential trend will increase the potential for wins for us as indeed demonstrated in this case. Beyond this new win, our pipeline remains broad, deep and growing consistently and includes potential wins with significant long term revenue potential for Silicom.
And now to our FPGA based solutions. As you know, we are continuing to invest significantly in developing and advancing our FPGA technology. Our technology bridges the gap between bare FPGA chips and cards to fully functional FPGA based integrated solutions, allowing our customers to tailor solutions to their exact needs.
This market is a key element in our long term growth strategy. In fact, we see very significant growth in this smart mix market with growth expected from just over $1 billion in 2019 to $2.6 billion, more than doubling by 2022.
From our standpoint, momentum and interest from existing customers and potential customers for our new FPGA based offerings continues to build. We see a trend away from basic network interface cards, towards those including offload and acceleration built on programmable FPGA based SmartNIC’s.
For Silicom, 2020 will be the year we see the early revenues from this sector, which we expect to run strongly in the years following. Beyond that, we are working hard to convert our strong FPGA pipeline into new design wins and associated ramp-ups over the coming years.
With regard to our guidance for the first quarter of 2020, we project revenues between $25 million and $26 million.
In summary, our focus has always been building our business for the longer term and this has served us very well throughout our history. Looking ahead, we look forward to a double-digit growth in 2020 and beyond.
We are now very excited with regard to the prospect of our Edge related business, both in the short term, as well as the long term. Our success will be built on the ramp of our already existing design wins, which include wins with major Telco’s, service providers and leading SD-WAN players, as well as further future design wins in that space.
Above that, we are optimistic about the potential of our other growth engine, our engine, our FPGA solutions for Cloud data centers, Cyber Security and 5G, which has the potential to become a significant growth driver for us.
With superior products and technologies, design wins and larger and larger companies, a strong base of loyal customers, a strong balance sheet, we’re ideally positioned to benefit from the long term development of the industry’s strongest trends and remain strongly confident about our prospects. The opportunities ahead for Silicom remain huge and we believe the coming few years will be much greater than what we have achieved over the past few years.
With that, I will now hand over the call to Eran for a detailed review of the quarter’s result. Eran, please go ahead.
Thank you, Shaike, and hello everyone. I would like to highlight that our results for the full year of 2018 and especially those of the fourth quarter of that year, included revenues from a particularly large project, which was cancelled in the previous year, so the year-over-year comparison in our financials does not tell the true story. Thus for the current quarter’s results, I would be comparing the results to that of the prior quarter, which presents a better reflection of the core business growth in the fourth quarter of 2019.
Revenues for the fourth quarter of 2019 were $25.5 million. This represents a growth of 6% compared with revenues of $24.1 million as reported in the prior quarter.
Our geographical revenue breakdown over the last 12 months were as follows: North America, 73%; Europe and Israel, 20%; Far East and rest of the world, 7%. During the last 12 months, our top three customers together accounted for about 35% of our revenues.
I will be presenting the rest of the financial results on a non-GAAP basis, which excludes the non-cash compensation expenses in respect of options and RSUs granted to directors, officers and employees, acquisition related adjustments, as well as discontinued project related write-offs. For the full reconciliation from GAAP to non-GAAP numbers, please refer to the press release we issued earlier today.
Gross profit for the fourth quarter of 2019 was $9 million, representing a gross margin of 35.1% compared to a gross profit of $8.5 million or growth margin of 35.2% in the prior quarter. Operating expenses in the fourth quarter of 2019 were $6.1 million or 23.9% of revenues compared with $6 million or 24.8% of revenues in the prior quarter.
Operating income for the fourth quarter of 2019 was $2.9 million or 11.2% of revenues, compared to operating income of $2.5 million or 10.4% of revenues as reported in the prior quarter. Net income for the quarter was $3.1 million or 12% of revenues compared to $2.5 million or 10.5% of revenues in the prior quarter. Earnings per diluted share in the quarter were $0.41 compared with $0.34 as reported in the prior quarter.
Now turning to the balance sheet, as of December 31, 2019, the company’s cash, cash equivalents, bank deposits and marketable securities were at all time high and totaled $90.6 million with no debt or $12.32 per outstanding share. In 2019 we generated an operating cash flow of approximately $24 million.
That ends my summary, and we would be all happy to take any questions. Operator?
Thank you. [Operator Instructions] The first question is from Alex Henderson of Needham & Company. Please go ahead.
Hey guys, nice print. Congratulations and thanks for the nice guide on the first quarter as well! So can you talk a little bit about the broader mechanics around your business over the course of ‘20. You are seeing somewhat of a shift in the mix of the business. I assume some of these projects that you’re dealing with are a little larger than your historical projects and therefore the 35% kind of gross margins that you posed to the last couple of quarters should shift to, what I would think are a little lower margin businesses. So should we be tailoring the gross margins down over the course of the year, back into that 30% to 34% range from the 35% that it’s currently been running at?
Okay, I will begin with responding to the latest part of the question and I would say that as we have always been saying, the range of gross margin that we predict is still 32% to 36%. But yes, I mean the more that we’re successful in our Edge business and we’re hoping for that to happen, it would take it towards the lower part of that spectrum between 32% and 36%. So actually I would, it would be strange to say, but I would say that I’m hoping that we would be going a little bit slower, because that would indicate hopefully that we are successful as we want to be with our Edge business.
Now this also explains or gives you more or less the color about the shift in our business, which is just like what you said. I mean we are, what we believed would happen throughout 2020 is mostly I would say the three – the following three elements:
First is a significant growth in our Edge business that would be the most important part for us, that’s one thing that we predict. The other one would be a flattering or even a certain decline that we don’t know exactly how much, but I would say a decline in our, I would say traditional business. And then the third part, would be I would say the early revenues coming out of FPGA wins. The combination of these is what – when I’m looking at all the numbers, this is what has given us the predictions that we’ve made, that I mentioned before and this is indeed taken into consideration, primarily the growth in the Edge business, which would be the major shift compared to 2019.
Right, so you are following exactly the pattern, but I wanted to ask on the questioning. So clearly the Edge, the SD-WAN type stiff is clearly accelerating the margins by us a little lower their, your flat to declining comment on traditional business. That sounds a little optimistic to me. I would think that that would be under a little bit more pressure than to just flat to slightly declining, but those margins tend to be higher.
And then I just was hoping you could talk to the margin structure around the FPGA when it’s, early ramp. I assume you have some start-up costs and then did the margins improve over time on that or how do we think about that?
Well, I think that the margins within the FPGA business are higher at the moment. Right now compared to a – definitely compared to the Edge. But that being said, the FPGA market is going through a transition as well, and I think that once we hit the mass market of the FPGAs, there would be a significant price pressure on the FPGA cause as well. The FPGA business as a whole is – I think would be growing just like the – I mean just like you could see from the smart cards growth predictions, but that would come together with I think a significant price pressure.
I don’t know exactly where this would take us right now in terms of margins. I do think that it would still help us. I do believe that because the level of stickiness with the customers there is going to be higher, the margins will be higher than the margins with the Edge by themselves. So this is why – I mean there is a margin, a spectrum that we are giving 32%, 36%. So in this year the FPGA margins are higher, but they do not contribute significantly to the overall margin, because the level of revenue is relatively low.
As we move to 2021, we would see much more revenues from FPGAs, but the margins there will be decreasing as well. So I don’t see a dramatic change overall, even going to 2021 in the margins that we are expecting right now.
Great! That’s very helpful. Just going back to the legacy traditional product lines, you know you have five reported on Monday. I know they historically have been a pretty important customer. Their systems business is down 10% to 15% over the last year. Clearly appliance sales are rolling off in a fairly significant way and the money that enterprises are spending are moving more towards cloud deployments where you know you really don’t have those type of products.
So what are you doing that is allowing you to be flat to slightly declining in that business, as opposed to seeing a more precipitous decline? And I actually think it would be to some extent helpful to actually see that roll off, to the extent that you know it becomes a lesser and lesser drag going forward. But can you talk a little bit more about the baseline of that, than why it isn’t declining at a more rapid pace?
Yeah, okay. So first of all I think your 100% right, that if we had to just take the business that we have in the card market and look at its rate of decline that it would be higher from what you have experienced.
The reason that we do not experience that that significantly is because all these customers, because they don’t want to get rid of course of their clients business, they find themselves in a situation that they still need to invest in that, which is something that they’re doing and that allows us to sell more content and even get some new design wins into their appliances and this is the reasons why this increase is coming from this additional content that we sell to our traditional customers compensates to a certain level, the decrease in their business, and that’s why the bottom line of all that is I would say relatively modest decline.
Of course when I’m saying that, there is always a risk that some of these new contents would not be achievable, but right now I do, we do – we definitely have a pipeline for these kinds of new content into traditional customers and that’s why what I believe will happen would be probably a decline, but not that dramatic as the pure business of these customers.
It we were to look at the full year 2019, what portion of the business is represented by that portion of the revenue stream?
This is not something that we provide. It is also difficult to provide, because there are a lot of things which could be a combination of both words, which is why we do not provide this kind of information.
If we could just shift the gears a little bit, can you talk about your thoughts around the OpEx outlook for 2020? Obviously the shackle’s [ph] been strong. [Cross Talk]
I think that what you’re seeing right now, more or less I mean is what’s going to happen throughout 2020. Probably it will increase our OpEx a little bit just like we’re always doing. We’re not expecting at this point anything dramatic.
Okay, so you know with that OpEx going from about 6.1 in the current printed quarter up to around 6.6 over the course of the year, is that kind of in the ballpark?
I think that’s in the ballpark, yes.
Great! And any thoughts on tax rate or anything of that sort, anything going on in Israeli tax rates that we should be aware of?
There is nothing to be – specific to be aware off. As I said in previous quarters, our long term expectation for effective tax rate is still in the range of 15%. This year it was lower than that. It was approximately 12% due to one-time reasons, so again I will guide them, guideline for the next year is approximately 15%.
Alright, great. I’ll cede the floor. I appreciate the clarity on the answers, thank you.
The next question is from [inaudible]. Please go ahead.
Q – Unidentified Analyst
Hi, good afternoon. A very nice quarter as always. I was wondering if you could comment on the share buyback during the quarter, as well as the cash builds up to $90 million. Are there any acquisitions out there that you’re looking at to use some of that cash and what do you plan to do with it otherwise?
A – Shaike Orbach
Okay, we will start with the first question and then Shaike will continue with the second question. As to the buyback, we progressed as planned. We intend to me the targets set by our board, which means the buyback of $15 million within one year. I can also say that by the end of 2019 we already repurchased approximately $8 million.
Q – Unidentified Analyst
Okay, okay, and is there any price limits that you’re going to put on it?
Q – Unidentified Analyst
Okay, then cash usage please?
Okay, so you ask about acquisitions and I can say there’s nothing on the table right now. But obviously with that being said, we always continue to look. We are looking for partners. When we find a partner, we engage into discussions and you can never tell where this would lead to, but as I said nothing on the table right now.
Q – Unidentified Analyst
Okay, thanks very much. Good luck! Thank you.
The next question is from Ethan Etzioni from Etzioni Portfolio Management. Please go ahead.
I just wanted to make sure I understood the numbers correctly. So you’re guiding further down relative to Q1 ’19, but then you’re guiding for plus 18 for ‘20 as a whole and then for ’21 you’re saying a higher growth, so that’s like – that’s 20 plus growth in ’21. Did I understand correctly?
A – Shaike Orbach
Yes. I mean we’re looking at significant growth mostly towards the second half of the year, which explains what you said, but yes, I mean your understanding is correct.
And you have confidence in this outlook?
A – Shaike Orbach
I do have confidence. Of course there are always risks, but this is based on the data that we’re having right now.
Data forecasts which are of course there’s no commitment, but that’s what we predict right now.
Excellent! Thank you.
We have a follow-up question from Alex Henderson of Needham & Company. Please go ahead.
Yeah, I was hoping you could give us an update. I had conversations around your key to large tier one service providers. Obviously over the course of last year there was delays in those programs. Can you give us an update of where we are relative to those two? It sounds like one of them is starting to ramp and the other one is still kind of hard to pin down. Is that the correct thinking here?
Well, let me say that in general if I had to limit myself into just 10 words, then I would say exactly what you said, but this does not give the full story and I’ll try to give a little bit more color on that.
So, I mean working, I would say that working with these two giants is an experience with both of them. The process of decision making, which by the way is not identical with both of them are something which is I would say sometimes erotic, but sometimes it seems to be stable and this is actually happening with both of them.
So in terms of potential, we see a significant or a huge potential with both of them and both of them are talking to us, not only about the specific projects that we started to work with, but on others. One of them is indeed ramping up much more significantly than the other right now, but you can never tell. That could change soon just by a single customer that one of them may have or a certain decision that one of them would have to use our devices in this case or in other cases.
So if I had to summarize, as I said in ten worlds, then yes, one of them seems to be more stable than the others, but I do believe that both of them still represent a significant potential even for that year 2020.
Second question, if I could. On the OEM SD-WAN space, there’s been a lot of shifting and transitions within who’s been successful over there for instance in the most recent Gartner and Quadrant Cisco, which had been one of the upper right Quadrant players went significantly backwards. The change in designs seem to be helping, the smaller players really significantly accelerate share gains and I think if I’m correct that your pretty well positioned in a lot of the smaller players, but has there been an impact as some of these companies have incorporated SD-WAN directly into the router or do you also play in that context as part of the subassembly for those ISR-type products?
Well, I mean there is one thing that I am pretty sure and I would be able to tell you that and that is that indeed that the – and I’m reading the reports I believe just like you do or more or less the same report. I think that the shrink in the share of Cisco in that market is something that is helping us.
Now we are not obviously a competitor to Cisco. I mean we are partnering with mostly software vendors and sometimes software vendors and integrators, which together with us and sometimes even together with additional companies providing, given additional hardware that we are not a part of – all this, I would say family is competing against Cisco, which is actually the trend of decoupling the software and the hardware. And by that, I mean providing to the end customers better solutions both from a price perspective and from a performance perspective.
I can tell you as an indication to that and I think that that may be the concluding part of that is that the recent design wins that we’ve just announced I would say belongs to this family. I mean belongs to this market which is shifting from I would say previous giants like Cisco and Juniper, to this combination of best of breed solutions from software, hardware and so on and so forth and I think that this is a demonstration that the market is indeed shifting in that direction.
It’s my sense that some of those smaller guys are growing 80% to 100% clip, so obviously pretty big growth rates. Relatively speaking, are there any additional customers coming on in those smaller OEMs or are you now pretty saturated?
I would say that there are additional customers coming, but I would like to say something just to make sure that I’m accurate, because we’re not necessarily talking about OEMs. I mean some of these processes, just like in our last win are not through an OEM relationship. I mean there is a software vendor who would like to work with us. This software vendor recommends us or presents us to the end customer and now this end customer is using our hardware together with this hopefully prepared software vendor, sometimes an additional integrator in order to – and that’s the group which is coming towards a win and that’s what is actually happening.
I would say that our, I would say pipeline which is continuously growing includes both, working directly with the end customers mostly in the Telco business, working with software vendors independently as a partner and through OEMs.
One more question along those lines. There has been an increase in features to some of the Tier 1 service providers within the SD-WAN space. To that extent are you seeing similar increase in feature designs in the OEM related customers that increase your content per unit. So are you gaining share within or gaining wallet within the existing OEMs and the SD-WAN space?
I think we are seeing I would say a trend in general for customers asking more powerful Edge devices. More in terms of the capacity or the power of the devices, more suitable towards uCPE, but even though not always it is being used as uCPE, sometimes it is still being used only for a specific application such as SD-WAN. But still, with a higher level of power we see that, can that be 100% sure if that’s related directly to the same requirement coming from the end market, but I think that we definitely see the market moving at a somewhat higher in the latter in terms of the requirements from our devices.
Okay, one last question on the – and then I’ll cede the floor again. On the FPGA side, obviously you guys do a differentiated approach to your FPGA business versus say what Xilinx/Intel does? Can you talk about how you interact with the Intel and how you – you know what business is naturally going to flow toward you versus what business are they going to choose to you know tick-off. Obviously you don’t want to compete really head-to-head with them, so how does that dynamic play out?
Well, I think that the dynamic in that market is really playing very good for us, especially because we had a very strong and powerful, I would say even relationship, both with Intel – I would say mostly with Intel, but also with Xilinx as well. As a result of that, we get customers I would say introductions and even support in a way from both companies.
I mean the main thing is not only to card itself. I mean first of all, I mean our solutions are not exactly their solutions. Secondly, we are taking responsibility for the full solution which they hardly do. They would do that only with their really biggest customers, but other than that they are in many cases prefer not to take the full responsibility, which includes the hardware and the IP which goes into the FPGA. They are just proposing that as a reference design and customers are looking for someone who would be taking responsibility and they are referring these customers to us. So actually we see these companies not as competitors, but rather as partners and we are gaining from them.
The issue with the FPGA is that because typically it involves not just the hardware, but rather IP, the sales cycle is longer and the ramp-up is longer as well. Because even once we are within a design win, then the customer needs to integrate that in his devices and there is a long, sometimes a long development process. Once this is being done, which is why it takes a longer time. But in terms of competition from Xilinx and Intel, I think that’s while I mean there could be some cases where we compete, I’m not saying that can never happen, but in general I’m considering them to be partners more than competitors.
Perfect! Thank you very much.
[Operator Instructions]. There are no further questions at this time. Before I ask Mr. Orbach to go ahead with his closing statements, I would like to remind participants that a replay of this call will be available by tomorrow on Silicom’s website, www.silicom-usa.com.
Mr. Orbach, would you like to make your concluding statement.
Yes. Thank you, operator. Thank you everybody for joining the call. We look forward to hosting you in our next call in three months’ time. Good day.
Thank you. This concludes Silicom’s fourth quarter and full year 2019 results conference call. Thank you for your participation. You may go ahead and disconnect.