Celestica Inc. (CLS) Q2 2012 Earnings Report, Transcript and Summary

Good morning. My name is Katie, and I will be your conference operator today. At this time, I would like to welcome everyone to Celestica's 2012 Second Quarter Conference Call. [Operator Instructions] Thank you. I'd now like to turn the call over to Manny Panesar, Director of Investor Relations. Mr. Panesar, please go ahead.

Thank you, Katie. Good morning, and thank you for joining us on Celestica's Second Quarter 2012 Earnings Conference Call. On the call today are Craig Muhlhauser, President and Chief Executive Officer; and Paul Nicoletti, Executive Vice President and Chief Financial Officer. This conference call will last approximately 45 minutes. Paul and Craig will provide some brief comments on the quarter, and then we will open the call for Q&A. [Operator Instructions] Copies of the supporting slides accompanying this webcast can be viewed at celestica.com. Before we begin, I would like to remind everyone that during this call, we'll make forward-looking statements related to our future growth, trends in our industry, our financial and operational results and performance and financial targets that are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. We refer you to our cautionary statements regarding forward-looking information in our company's filings and including the Safe Harbor statement in today's press release. We refer you to the assumptions, risk factors and uncertainties discussed in the company's various public filings, which contain and identify factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. These filings include our Form 20-F and subsequent reports on Form 6-K filed with the Securities and Exchange Commission, which can be accessed at sedar.com and sec.gov. During this call, we will refer to certain non-IFRS financial measures, which include adjusted gross margin, adjusted SG&A, adjusted operating margin, or EBIAT, adjusted EPS, ROIC and free cash flow. These non-IFRS measures do not have any standardized meaning under IFRS and are not necessarily comparable with other non-GAAP financial measures presented by other companies, including our major North American competitors. We refer you to our press release, which is available at celestica.com for more information about these non-IFRS measures, including a reconciliation of the non-IFRS measures to the corresponding IFRS measures, as appropriate. I will now turn over the call to Paul Nicoletti.

Thank you, Manny, and good morning, everyone. Celestica continued to generate cash and delivered solid returns on invested capital for the second quarter despite a soft demand environment and the start of the wind-down of our manufacturing services for Research In Motion. Second quarter revenue was slightly above $1.7 billion, coming in at the high end of our guidance range. Second quarter revenue grew 3% sequentially, while on a year-over-year basis, revenue was down 5%. Some additional highlights for the second quarter. IFRS net earnings of $23.6 million. Adjusted earnings per share of $0.22 came in slightly lower than the midpoint of our guidance and included a tax impact of $0.02 per share. Non-IFRS operating margin of 3.3% was sequentially lower by 10 basis points. ROIC continued to be strong at 23.4%. We generated approximately $17 million of free cash flow for the quarter. We repurchased and canceled 4.6 million shares as part of our share repurchase program, and we recorded restructuring charges of $20 million, primarily related to the wind-down of our manufacturing services for RIM. From an end market perspective, we experienced sequential growth across all end markets with the exception of consumer. Our consumer end market, which represents 21% of revenue, declined 6% sequentially and was down 17% year-over-year, primarily due to weaker demand. Our diversified end market increased 1% sequentially, and on a year-over-year basis, grew 39%, driven by new program wins, which accounted for approximately 1/3 of the increase, with the balance coming from the acquisition of Brooks' contract manufacturing division in the second half of 2011. The diversified end market now represents 19% of our total revenue, up from 13% in the second quarter of 2011. The communications end market, which represents 32% of total revenue, was up 3% sequentially. On a year-over-year basis,…

Thank you, Paul, and good morning, everyone. As Paul mentioned, I'd like to provide you with an update on the remainder of the year, our current market outlook and the status of our priorities. First, let me say a few words on our second quarter performance. Within a challenging environment, we continue to deliver solid execution for our customers, maintain a strong balance sheet and we continue to generate returns on invested capital above 20%. We're very pleased with the progress that we've made in our diversified end markets, in the organic growth that is now beginning to take place from new business wins. Furthermore, we see additional opportunities to further expand our share in these markets with existing and new customers. We also completed the second quarter with a strong net cash position, returning capital to our shareholders through our continued share repurchases. We consider our cash position to be a major strategic advantage that we will continue to leverage to pursue investments, which enable us to accelerate our performance and deliver additional value to our customers and our shareholders. As you read from our press release today, we're putting this cash to work in our growth areas by adding more capabilities. We're very pleased to announce an agreement to acquire D&H Manufacturing, a leading manufacturer of precision-machine components and assemblies focused predominantly today on the semiconductor capital equipment market, and estimated annual revenues of approximately $80 million. Based in Fremont, California and located in the North American hub of leading semiconductor capital equipment OEMs, this company's operations provide manufacturing and engineering services, coupled with dedicated capacity and equipment, for prototype and quick-turn support to some of the leaders in the semiconductor capital equipment industry. This acquisition will not only bring additional capability in the form of large scale,…

[Operator Instructions] Your first question comes from the line of Amit Daryanani.

There's 2 questions from me. One, I'm just trying to -- make sure I have the math right. If RIM is going from 17% to 10% in Q3, it suggests x RIM, you guys are talking about the business growing 4% at the midpoint. Could you just confirm that? And that guide kind of looks feasible. So what's the offset to the macro headwinds you guys are talking about, that still is enabling you to guide seasonal, excluding the RIM wind down?

Amit, it's Paul. I think overall what you're seeing -- we've been talking about some of the new program wins that we've been booking over the last year and our expectations of those programs coming online in the second half of this year. So I think you're seeing the benefits of that. So these -- again, these are programs that we have been booking over the last year that are in ramp-up phase right now.

Got it. And then you guys are talking about a wind down with RIM, but it still sounds like it's going to be 10% of revenues in Q3. So should we think about it essentially heading toward 0% by Q4? And then when you talk about your longer-term margin profile of 3.5% to 4%, could you just talk about a revenue run rate that you guys need to achieve that number?

Sure, Amit. So we expect to largely be done with RIM at the end of third quarter, as far as the manufacturing operations are concerned. So if you think about fourth quarter, I mean, we do not expect to have any material amounts in manufacturing operations in the fourth quarter. So you'll see it fall off pretty significantly at that point. As we -- to your second question, as we said in our formal remarks, the 3.5% to 4%, we'd expect revenues certainly to be in the $1.75 billion per quarter range to get there. And that based on everything we see right now, that would take us into the second half of '13 before we would -- we'd see that.

Your next question comes from the line of Wamsi Mohan from Bank of America.

Is the right way to still think about the restructuring associated with the RIM wind down as $35 million and the incremental restructuring that you're talking about is just to compensate for the lower revenue levels? And if that is the case, what specifically is that remaining $5 million to $15 million geared towards, from a location and function perspective?

So Wamsi, it's Paul. So the $35 million original estimate is within the $40 million to $50 million. We're not going to break them out kind of going forward. Suffice to say, the net charge is within that $40 million to $50 million. When we look at the balance, it's essentially looking across the company and looking to reduce overheads to reflect the reality of losing a customer the magnitude of RIM. So it's essentially actions across the entire network.

But just to be more explicit, Paul, I mean, the $35 million original estimates for winding down the manufacturing for RIM still stands. It's not that, that number has gone up to $45 million to $50 million. This is incremental actions outside of that?

Yes, that's correct.

Okay. And then the pace of share repurchases seemed to have slowed down a bit relative to the first quarter. Any particular reason for that? It seemed like those are a little bit lower -- slightly lower shares in a higher model relative to where you ended up?

Nothing in particular, Wamsi. So I think we bought around $6 million in the first quarter, a little less than $5 million this quarter. And as I said earlier, we would expect to complete the program here in third quarter.

Your next question comes from the line of Brian Alexander from Raymond James.

More color, Paul, on how much the -- of the $40 million to $50 million charge is headcount versus facilities or equipment related, and how much of that charge is cash versus noncash?

Sure. So of the $20 million that we've taken so far, $7 million was cash, and that largely would be people actions, and the balance was noncash, so essentially writing down assets to fair market values. If I think about the balance, predominantly it'd be people actions. So the cost could be severance, largely. When you look at the of $40 million to $50 million in aggregate, as per -- in our comments, about 70%, so 7-0, we would expect to be cash charges.

Okay. And then on the $1.75 billion in revenue to get to 3.5% to 4%, why wouldn't you be able to get there on a lower revenue level, given that you've been at that kind of margin range in the past on similar revenue? And going forward, your mix should be a lot better. So I guess I would have thought that you can achieve the 3.5% to 4% on something less than the $1.75 billion.

I think, overall, certainly, when we look at what's going on from a marketplace point of view, there has been, I would say, some pressures from a pricing point of view. And second, for us, it's continuing -- we're continuing to invest as far as some of the growth areas that we see long term. So certainly, we'll be trying to get there as quickly as we can. But based on what we see right now, regarding the timing, the speed to ramp up new programs and even some of the costs to ramp up these new programs, it'll take us into that $1.75 billion to get to that 3.5% to 4%.

Your next question comes from the line of Sherri Scribner from Deutsche Bank.

I was hoping to get a little more detail from you, Craig and Paul, about the growth that you're expecting next quarter x the RIM business. I think you mentioned diversified and communications growing. I guess I was a bit surprised to hear, at least, that communications was growing. That seems to be a relatively weak segment. So hoping to get some detail from you there beyond the new programs.

So Sherri, it's Craig. I mean, although the uncertainty we talked about at the beginning on the call, I mean, excluding RIM manufacturing, we're expecting sequential growth overall, primarily, as we mentioned, in the diversified end markets and communications. Within communications, it's sequential growth, primarily from specific customers, and then we're on winning programs that are growing. And within diversified, we continue to see, as Paul mentioned earlier in his remarks, the impact of the new business wins we've had over the course of the last 12 to 18 months, and then we're seeing an acceleration then in the ramp of the volume of those new programs. So I think you're seeing the benefits of the investments we've made previously beginning to show itself on the revenue line. And then, obviously, on the storage and server space, we had a strong second quarter, and we're expecting a modest decline in the third quarter, but demand appears to be stable on an overall basis. So that's kind of the story behind the story.

Okay. And it sounds like most of the growth is being driven by these new programs. Would it be fair to say that some of your more mature programs are slower in this type of environment, or is that not a fair statement?

No. They're continuing to grow. But I think the relative growth is coming from new programs with new customers.

The next question comes from the line of Matt Sheerin from Stifel, Nicolaus.

So just a question on the diversified manufacturing business. You've done some acquisitions in the semi cap equipment space. And trying to get an idea of the exposure to that market within diversified and what the other end markets within that business are, and whether there's a concern about maybe too much exposure to one specific subsegment, given the cyclicality in that market.

Well, clearly -- Matt, it's Craig. The investments we've been making in diversified have begun to show significant payoff. This specific investment builds capability and the margins for which we expect to deliver in this segment are enhanced. By adding this capability, it's a higher value-added capability that we believe we cannot only leverage in semiconductor equipment but outside of that, in the complex mechanical space. We are seeing the hypothesis, the thesis around our Brooks investment, in that the strength of the offering is dramatically improved in the eyes of our customers. So it is growing very rapidly relative to the other segments, given the acquisition. With, now, the D&H acquisition, we would expect semiconductor cap complex mechanical, I think you can think of it more in the future, at least, at this point in time, to begin to emerge as the fastest-growing largest segment. But again, not -- and capability not totally focused on semi cap. And the real objective here is to build a portfolio of capabilities in health care, aerospace and defense, semiconductor equipment and industrial that leverages a large vertical called complex mechanical systems capability to be a very, very strong part of the diversified mix, frankly. So that's the strategy. That's the thesis. And we are definitely beginning to see significant benefits. So the concentration is clearly something we've recognized as an important risk to manage. Another reason, as Paul mentioned, why we've taken an additional actions on the restructuring is to make sure our fixed cost base is in line with the DNA of Celestica, to maintain the flexibility to deliver our return objectives over an economic cycle. So all in all, it's -- we think it's a very, very sound strategy. We're very excited about it. And notwithstanding the RIM challenge, we think the real focus now is on the future and accelerating our progress.

Okay, great, makes sense. And then on the consumer business, it looks like you're going to have a little bit of business in that segment left after RIM is wound down. What's the strategy there going forward in terms of consumer?

The strategy, frankly, we're certainly not going to pursue any additional smartphone application. So you won't see us participating in the manufacturing space in the mobile handset space, but you will see us participating in the service area. So a large part of the learning around what we've done with RIM is created a base of learning and a base of capability and the support and service of the mobility markets, and then we have some selective opportunities where we are able to participate in the design of the products. But large -- as we look forward, you'll be looking at about a 10% share of our company in this space, largely driven by our services offerings.

Your next question comes from the line of Lou Miscioscia from CLSA.

When we look at your comment for the $1.75 billion, and you said second half, could you frame it possibly for September, December? Because that would imply a pretty quick bounce back in revenue growth and maybe, obviously, this won't affect -- organic demand would drive that, so it sounds like maybe you've got a lot of wins to help there?

Lou, it's Paul. We're not going to be specific on third quarter or fourth, Lou. I'll leave that to you, as far as your view on end markets. Certainly, a lot of it's going to be dependent upon mix and, again, as I said earlier, just the timing and the pace of these programs. I appreciate that while we don't give specifics on bookings, we've been talking for the better part of the 1.5 years about new bookings, particularly in our growth area. And per the comments earlier, I think you're starting to see that in the diversified markets, in the growth that we've been expecting from second to third. So those program wins are continuing. Obviously, what the end market demand is going to be is going to be a large factor as to -- just to when we get there, and that's difficult to predict right now. But we're still confident about the direction and the trajectory that we're on. And I guess to the last comment, certainly, we're balancing the short term and the long term. So we want to continue to make the investments to build upon the franchise that we have. So we're trying not to balance that point, short-term earnings versus long-term investments, to drive the business beyond 2013.

Okay. And then a follow-up on the operating margin guidance for the second half and then, obviously, pulling RIM out. It seems like you should be able to stay, hopefully, in the 2.5% to 3% range, I guess, going forward, probably put you in a EPS range of somewhere, at least, in the mid-teens. Does that sound reasonable?

Well, again, at this quarter, at 3%, the midpoint is $0.20. So it just depends where you park yourself in that 2.5% to 3% range. So again, I think that every 10 basis points would be slightly less than $0.01. So you can model that in, Lou.

Yes. But it seems like that will be steady going forward into first half?

Yes. I mean, certainly, barring anything else macro-wise from where we are right now, again, balancing short term and long term, 2.5% to 3% is where we would see it in the short term. And as I commented, that's where we would expect to be for the fourth quarter.

Your next question comes from the line of Jim Suva from Citi.

Can you just readdress again the question about the sales, maybe when you get to $1.75 billion due to operating margins of 3.5% to 4%? The way I understand it is RIM would have been meaningfully below corporate operating margin. But some of your acquisitions in ramping of diversified, such as Brooks and D&H -- and maybe D&H year-to-date outlook for the $1.75 billion relating to this. I just would have thought that you would have made a good much, much lower base, because you're always ramping business, but yet you're getting rid of the less-profitable RIM business. Can you just kind of readdress that structurally? Has pricing gotten more competitive, or kind of what's really changed there in the model?

Jim, it's Paul. Fundamentally, I agree with you. RIM margin was lower than the company average, but it's having to do with the absorption impact. So certainly, while the fully loaded margin was lowered, it is -- it was absorbing overhead of the company. So given the magnitude of it, it's a question of that overhead and how long it takes us to backfill the revenue to absorb that overhead. That said, the reason why we're taking more charges kind of outside of the directory and envelope is to bring down the fixed cost to get to the margin profile sooner. To your second question, has the environment worsened somewhat around pricing, I'd say on balance, the answer to that is yes. So I think as volumes have been challenged across-the-board, obviously, I think all of our customers are looking for ways to save money on their end, and certainly, we've seen some of that in our portfolio throughout the year.

Jim, it's Craig. I mean, one of the impacts of the mix shift in the company is the number of new program launches and the size of the engagements tends to be a broader mix of customers than some of the large-scale mobility or infrastructure customers. So I think the combination of all these factors is causing us to take a more thoughtful look at the structure of the company and then reallocating resources to the growth areas and, at the same time, driving a leaner cost structure to deliver a higher mix at the same service levels we do for our large-scale customers. So a lot of moving parts, but obviously, well in hand, and we're investing before the opportunities emerge to make sure we execute at very high level.

Your next question comes from the line of Todd Coupland from CIBC.

Just wondering about the fourth quarter. Excluding RIM, should the momentum that you're seeing in the business with the new programs in Q3, is there any reason that shouldn't continue at a similar pace into Q4? Or will it flatten out because the new program ramps are absorbed in Q3?

Todd, we're not going to give guidance for Q4 right now. So we did want to give you kind of the corners of the box from a margin perspective. So we're not going to give anything specific quantitative. I will draw you back to our comments earlier. We have been talking, over the last year and 1.5 years, about program wins that we expected to give us traction in the second half of 2012. We're seeing that into third quarter, so we would expect to see that continuing to fourth.

Okay, great. And then secondly, once the restructuring is complete, where would you think SG&A would be on a cash dollar basis? If it's $56 million now, where would you hope it to be with the restructuring?

Todd, I think that we would see that come down somewhat, but backfilled by some of the SG&A that we'll acquire with the acquisition we announced today, assuming, of course, that closes. So I think that when you think of the zone of where it is right now, the $56 million to $57 million range, looking forward, that's where I would expect it to be. So otherwise, coming down, but then backfilled by some SG&A we're acquiring with D&H.

Okay. So post-restructuring, that's a good place to be and then leverage will come from whatever top line you can get through, market, programs, et cetera, so.

That's right.

Your next question comes from the line of Gus Papageorgiou from Scotia Bank.

Just on the acquisition, can you give us a little sense on the valuation metrics for that acquisition to -- I mean, the only thing we have here is the sales and it looks like you paid about 88% of sales for that, where you guys are trading about roughly 30% of sales. So it just -- on that metric, it seems really expensive. So can you give us a sense of margins and any sort of valuation metrics? And when do you expect it to be accretive?

Sure. Gus, so given the nature of the business, the margin profile is much higher than what you see in the kind of standard EMS business. So the margin profile for that type of business is in the high-teens, overall.

And that's EBIT margins?

Yes. Operating margins, that's right, yes. So it's a much more profitable business overall than the base EMS. So as far as the accretion, again, assuming the deal closes by the end of third quarter, when we look into fourth quarter, I'd expect revenues of around $20 million for the fourth quarter. Negligible on an earning impact, in that there are some integration deal-related cost that we'd expect to incur within the first quarter, but expected them to be a positive contributor to earnings starting in first quarter.

And can you -- sorry, just quickly, can you give us a sense of revenue growth? Has the business been growing, or is it pretty steady?

It certainly follows the cycle of semiconductor, Gus. But on balance, shaving the cyclical piece off, it's been growing over the last couple of years.

Your next question comes from the line of Brian White from Topeka.

When we think about semi cap, it sounds like diversified will be strong in the September quarter. How do we think about semi cap in the third quarter?

We had a -- we've had very solid quarter in the second in semicon. As you've read and we're seeing as well, we are seeing some softness going into third quarter. So we're not immune there, but notwithstanding that, that's been taken into account in the overall strength that we've been talking about in diversified. But certainly, we are seeing a reduction from where we were in second quarter.

Okay. But diversified will still grow sequentially because of new programs that make up for that weakness?

Yes. So as I said, we've taken, yes, the weakness in semicon into account, in the numbers we've been talking about here today. And notwithstanding that, on balance overall, given strength and program ramps in other areas, non-semicon related, we expect the overall diversified markets to grow.

Okay, great. And then D&H, is it adding anything, a new capability to the portfolio? And is this more vertically integrated than Brooks, or is it just an expanded customer base and footprint?

So it's adding a new capability. I mean, as we mentioned, it's precision-machined components for wafer fabrication equipment. It's manufacturing services and CNC machine capability. So it supports the strategy to grow. It adds capabilities directly apropos to the semicon market. On the equipment side, they also have a leverage to grow that across and enhance our system integration capability at significantly higher value added, to further enhance our value added in the space and our margin capability. So it is a level of vertical integration, not so much in capacity as in capability, and obviously, it brings capability which then we can leverage in bringing that capability to our new Asian location to strengthen our Asian presence in support some of the major companies. So we view this opportunity as unique. It provides high value and high precision machined critical components. Unlike the more commoditized vertical plays, which we've stayed away from. So high degree of synergy between this business and our existing semicon cap business, and the expectation is we can expand this further into some of the other verticals. So we're very comfortable in not only with the exposure but the value it's going to bring both to our customers and in what we know on a semicon side, and then hopefully, what we can leverage on the some of the other markets. So again, it's -- we think it's a real value-added play.

Your next question comes from the line of Naser Iqbal from Salman Partners.

Just as a first one, Craig, do you think in 2013, as we look for growth in the company, is it that do you expect any more difference in the program win contribution than historical, like you think 2013 could be a big year? Or is it going to be typical, your new program wins cycles? And do you think that the end market demand have -- is going to be improving in that year, or do you need much of an improvement?

You say a big year. So let me just try to break it down. We got a historical company that was based on a mix of business that's going to be dramatically different in 2013. We think the RIM disengagement presents a unique opportunity. Now that we'd be much more focused on leveraging the capabilities, we will see us growing faster than the macro market, based on our new program wins. And then the real challenge, as we build proof points and capabilities, we see the opportunity to accelerate that. So we expect that the -- to exit the year at 25% diversified. And we've got a much more stable base of business now with stickier customers, large-scale engagements in markets like semiconductor, a growing market position in the aerospace. The defense market is largely in the commercial side. And then we've got tremendous opportunity to continue to grow in diversified health care and then further expand that with our managed service strategy. So we are a company that is really doing the things that we set out to do. We're accelerating our penetration in diversified, albeit we're doing some of that on the back of the RIM disengagement. But this is a real opportunity for us to dramatically transform the company faster than we might have had we not been faced with this RIM challenge. So all things considered, we're looking for us overcoming the economic headwinds, making our own weather and doing it in a way that allows us to continue to deliver our return objectives and to be the leader in the stewardship of the shareholder capital, and frankly, it's doing what we say.

Great. No, you sound very excited. I think we're enthused as well. And just my final question, Paul, I would have thought that given the additional amount of the restructuring you're doing on top of the $35 million and to get to 3.5%, is it that just that the investing some of these new initiatives is taking something away that you would have done the $40 million, $50 million, and you would have gotten there sooner but you're continuing to invest in the business?

Yes, Naser. So first, I mean, the $40 million to $50 million, it's important to remember that the majority of that is associated with RIM, and that's where -- obviously, the business is gone, and the profit contribution is gone. So we're having to take those charges just to stay flat profitability-wise. So on the additional restructuring, it we will follow similar patterns that -- than we've seen before and that is, generally, paybacks are about a year. We expect to incur those charges again by the -- as we -- and in 2012 and to start to see savings fold out early in 2013. The market is pretty dynamic right now. I mean, I mentioned earlier, pricing is somewhat of a challenge. Could we get there on the lower revenue envelope? That'll depend on mix and just, again, the timing and the pace of these program wins. So it's possible that I think -- as I said, when we take everything into account right now on a balance basis, that's the revenue envelope that we would see.

Your final question comes from the line of Gabriel Leung from Paradigm Capital.

So 2 questions. First, in terms of M&A, can you talk about sort of the breadth of opportunities you're seeing out there and also sort of valuation points?

Gabriel, it's Paul. I mean, the breadth of opportunity is tied to our focus areas. So our interests are in what we can do to add capabilities, add technology that helps us in diversified markets and helps us in our services areas. So our funnel of M&A, obviously, matches up those things to those things. From a valuation point of view, from my comments earlier, those types of businesses are higher-margin type businesses and so are higher multiples than what EMS typically is -- trades at. We certainly look at these things, which I'd characterize as tuck in, in nature, capabilities that we think we can build around and help grow our business and to deliver new overall margin envelopes that we've -- that we're driving towards.

Great. And then I guess secondly, with the winding down of RIM, as you lose here, you're going to have somewhat of a less volatile business. And when you combine that with the free cash flow and the current cash and the balance sheet, is -- does that mean a discussion around dividend is more relevant under this scenario? What are your thoughts on that?

Gabriel, I think our bias will continue to be on share buyback versus the dividend. Just from the point of view of -- while I agree with you that the revenue envelope will be less volatile, given lower consumer exposure, we are still investing for the business, investing to grow, and we want to maintain the flexibility to either accelerate or decelerate the pace of our share buybacks, based on what we're seeing. So net, we don't see dividends as something that we would embark on here in the foreseeable future.

I turn the call back over to the presenters.

Thank you, Katie, and thank you, everyone, for joining us on the call.

And we look forward to seeing you next quarter. Thank you.

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