Comtech Telecommunications Corp. (CMTL) Q2 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to Comtech Telecommunications Corp.'s Second Quarter Fiscal 2015 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, March 12, 2015. I would now like to turn the conference over to Ms. Maria Salerno of Comtech Telecommunications. Please go ahead, ma'am.

Thank you, and good morning. Welcome to the Comtech Telecommunications Corp. conference call for the second quarter of fiscal year 2015. With us on the call this morning are Dr. Stanton D. Sloane, President and Chief Executive Officer of Comtech; and Michael Porcelain, Senior Vice President and Chief Financial Officer. Before we proceed, I need to remind you of the Company's Safe Harbor language. Certain information presented in this call will include, but not be limited to, information relating to the future performance and financial condition of the Company, the Company's plans, objectives and business outlook, and the plans, objectives and business outlook of the Company's management of certain significant risks and uncertainties. Actual results could differ materially from such forward-looking information. Any forward-looking statements are qualified in their entirety by cautionary statements contained in the Company's Securities and Exchange Commission filings. I am pleased now to introduce the President and Chief Executive Officer of Comtech, Dr. Stanton Sloane. Dr. Sloane?

Thank you, Maria. Good morning, everyone, and thank you for joining us on the call. Before discussing yesterday afternoon’s press release, which announced Comtech’s second quarter results and updated our business outlook for fiscal 2015. I would like to take a moment to provide a few comments regarding the recent leadership change announced by our Board of Directors in December of 2014. I joined the Comtech Board in January of 2011 and I’ve been privileged to be a Director and now CEO and President. We have a top-notch management team here at the Company world-class products also have tremendous market opportunities in front of us. I’ve admired Fred Kornberg’s leadership and I’m honored to step into his prior roles. This will be big shoes to fill. Let me shift now to current topics, as announced yesterday we reported our second quarter results of $81.8 million in revenue GAAP diluted earnings per share of $0.46 and adjusted EBITDA of $14.9 million. In summary, we are pleased with our solid second quarter financial results. At the same time in light of the slowdown in satellite earth station bookings and a large shift associated with timing of anticipated orders for large contracts in over-the-horizon product line. We now believe that revenues in fiscal 2015 to be in the range of $320 million to $330 million. GAAP diluted earnings per share is expected to range from $1.35 to $1.51 and adjusted EBITDA is expected to be in the range of $52 million to $56 million. Our updated earnings guidance for fiscal 2015 includes approximately $1 million of incremental costs associated with senior leadership changes. Given our new guidance, we no longer expect year-over-year revenue or EBITDA growth. Nevertheless I view these events on the short-term impediments on the road to sustainable long-term growth. So it’s assuming the leadership role in January. I spend a great deal of time meeting with our management team, our employees and our customers. Well my review of strategy and operations is not yet complete based on what I’ve already seen I can tell you that I am confident our products and technologies are second to none. And I do believe that we are on the path to long-term growth. Now, before I turn the call over to Mike I want to thank Fred personally for his service and commitment to Comtech and to our entire management team all of whom I have assisted and making sure I get up to speed quickly. Over the next few months I expect to continue to meet with customers and investors and continue the critical work Fred and management team has started. With that said, let me turn over to Michael Porcelain, our Senior Vice President and CFO to provide an overview of our financial results and some comments on our business outlook. I will return later and talk more specifically about each of our business segments. Mike?

Thanks, Stan, and good morning, everyone. Let me walk you through our Q2 results and as I do I will provide some comments as it relates to our updated fiscal 2015 business outlook. During Q2, we generated revenues of $81.8 million of which 27.5% were for U.S. government end users, 60.8% were for international end users with the remainder being for domestic, commercial and customers. Net sales in our Telecom Transmission segment were $53.9 million in Q2 of fiscal 2015, as compared to the $56.5 million we achieved in Q2 of last year representing a decrease of 4.6%. This decrease reflects lower net sales on both our satellite earth station product and our over-the-horizon microwave system product lines. During the second quarter of fiscal 2015, we experienced a significant slowdown in bookings as well as lower sales in our satellite earth station product line. As we first discussed in our first quarter SEC filing and on our last conference call, global oil prices had plunged certain businesses we are experiencing reductions in revenue and we did see reduced spending by some of our customers in November. Unfortunately during our second quarter volatile market conditions continued. In fact, during this past quarter oil prices continue to decrease and the U.S. dollar strengthened. As most of you know almost all of our sales are denominated in U.S. dollars as such these conditions resulted in lower purchasing power from many of our international customers. Ultimately, and although December and January monthly bookings for our satellite earth station products increased from the level we saw in November they did not reach the levels we were originally expecting. As such and although we believe one of the pipeline in satellite earth station opportunity is strong, we believe many of our customers will continue to face economic headwinds and have adjusted our expectations for this product line. Looking forward, we believe sales in fiscal 2015 will be lower than the level we achieved in the fiscal 2014 and based on the timing we expect sales to be weighted towards the fourth quarter of fiscal 2015. Now, let me give you some color on our over-the-horizon microwave systems products. Here sales on this product line in Q2 of fiscal 2015 we are also lower than Q2 of last year. We continue to see strong demand for our over-the-horizon microwave systems products from both the U.S. government and international customers. However, we have updated our assumptions as it relates to the timing of certain expected large orders and our shifting the anticipated related revenue on operating income from fiscal 2015 to fiscal 2016. Stan will provide some color as it relates to these opportunities, I just want to say here that the awards for these potential projects are large, the sales cycle is long and the timing of orders is difficult to predict. Net sales in our RF Microwave Amplifier segment were $21.6 million in Q2 of fiscal 2015 as compared to $22 million in Q2 of fiscal 2014, a decrease of 1.8%. To date the volatile business conditions that have impacted our satellite earth station product line have not significantly impacted our RF Microwave Amplifier segment. In fact, bookings for the second half of fiscal 2015 are expected to be slightly higher than the first half and many orders we expect to ship in the balance of fiscal 2015 are already currently in our backlog. As such revenue and operating income in this segment are expected to be higher than the level we achieved in fiscal 2014 with growth expected to occur primarily in the latter part of the second half of fiscal 2015. Turning to our Mobile Data Communication segment, sales in Q2 of fiscal 2015 were $6.3 million as compared to $6.9 million in Q2 of fiscal 2014, a decrease of 8.7%. This decline in sales is largely attributable to the absence of sales in our most recent quarter of certain SENS technologies and products as well as lower sales to a small customer. Sales in both periods include $2.5 million of revenue related to our BFT-1 intellectual property licensing fee. For the year, given the discontinuation of sales of certain of our SENS technology-based solutions, net sales of our Mobile Data Communication segment are expected to be lower in fiscal 2015 as compared to fiscal 2014. Now let me walk you through our gross margin and other data to give you some perspective on our results. Our gross profit percentage in Q2 of fiscal 2015 was 46.3% versus the 43.7% we achieved in Q2 of last year. This increase is primarily driven by higher gross profit percentage in all three of our operating segments. During the quarter, we recorded $1.5 million of benefits to gross margins resulting from better than anticipated performance and warranty reserve reductions for certain over-the-horizon microwave system contracts. Looking forward Q3 and Q4 will not reflect this $1.5 million of gross margin benefit and despite all the various mix changes and year-over-year decline in expected sales that are more thoroughly described in our form 10-Q filed with the SEC, we believe that our consolidated gross profit in fiscal 2015 as a percentage of consolidated net sales will be slightly higher than the level we achieved last year. On the expense side, SG&A expenses were $16 million or 19.6% of Q2 fiscal 2015 net sales as compared to the $16.3 million or 19.1% we achieved in Q2 of last year. SG&A expenses in the second half of fiscal 2015 are expected to reflect almost all of the $1 million of incremental cost associated with the Senior Leadership Changes announced by our board. For the year, we expect SG&A expenses and dollars in fiscal 2015 to be comparable to fiscal 2014 but as a percentage of sales to be slightly higher. R&D expenses were $9.7 million or 11.9% of sales versus $8.3 million or 9.7% in Q2 of fiscal 2014. As a reminder, both periods do not reflect customer-funded R&D projects, which approximated $2 million in Q2 of 2015 as compared to $3.6 million in last year’s comparative Q2. We expect company-funded R&D dollars for fiscal 2015 both in dollars and a percentage of consolidated net sales to be higher in fiscal 2015 as compared to fiscal 2014. Amortization of intangible lives was $1.6 million for the second quarter of both fiscal 2015 and fiscal 2014. Total stock-based compensation expense, which is recorded in our unallocated segment, was $1.1 million in both comparative periods. Based on the amount and type of outstanding equity awards, stock-based compensation in fiscal 2015 is expected to be higher than fiscal 2014. Consolidated operating income in Q2 of fiscal 2015 was $10.6 million, or 13% of consolidated net sales, as compared to $11.2 million or 13.1% in the second quarter of last year. The decrease in operating income, both in dollars and as a percentage is primarily due to lower consolidated net sales during the second quarter of fiscal 2015 as compared to second quarter of fiscal 2014. Given the reduction and expecting sales and incremental costs associated with our senior leadership changes we are now targeting operating income as a percentage of consolidated net sales in fiscal 2015 to be approximately 11%. Interest expense was $0.1 million in the second quarter of fiscal 2015, as announced in May 2014 none of our 3% notes are outstanding any longer as such we expect interest expense for fiscal 2015 to be significantly lower than fiscal 2014. Interest income and other in both periods was nominal. Turning to income taxes, we did recorded discrete tax benefit of 600,000 or approximately $0.04 of diluted EPS, which result in our GAAP effective tax rate for the second quarter of fiscal 2015 being 28.7%. Excluding the impact of any discrete tax items our effective tax rate for the year with approximately 34.75%, which does include the extension of the federal research and experimentation credit through December 31, 2014. On the bottom line as I mentioned earlier, we delivered GAAP diluted EPS of $0.46 in Q2 of fiscal 2015. Now let me provide some additional financial metrics to add some color to our results. Adjusted EBITDA as defined at the end of our press release that we issued yesterday, was $14.9 million in Q2 of fiscal 2015. At January 31, 2015, our backlog was $129.4 million. Our balance sheet remains strong. We had a $135.1 million of cash and cash equivalents and no long-term debt as of January 31, 2015. This cash balance does not reflect our Q2 dividend payment that was just made in February, which approximated $4.9 million. Also yesterday our Board of Directors approved the divided for the third quarter of fiscal 2015 of $0.30 per common share. This divided is expected to be paid on May 21, 2015 the stockholders of record on April 22, 2015. To date and over the past 18 consecutive quarters we have paid out almost $95 million of dividends and we continue to believe our dividend program is an excellent way to return capital to our stockholders. During the first six months of fiscal 2015 we did have operating cash outflow of $8.2 million, as stated during our prior conference calls we do expect to generate significant cash flows this year. However, it is expected to be generated in the second half of the year. We currently have a large receivable from a large U.S. prime contactor, which we expect to begin collecting on shortly. In addition, assuming the first option year for the IP fee of $10 million is build in April and collected shortly thereafter, cash flow from operations in the second half should come in pretty strong. Before turning it back to Stan, I do want to give some color on our third quarter, in case you did not see our comments in our press release yesterday. We expect that consolidated sales in our third quarter of fiscal 2015 will be lower than the consolidated net sales achieved in our second quarter. In addition, our GAAP diluted EPS is expected to range between $0.20 and $0.24 for the quarter. I want to point out that our Q3 revenue was expected to reflect period-to-period mix differences including shipments of production units pursuant to our contract to develop and manufacture the ATIP for the U.S. Navy, Space, and Naval Warfare Systems Command. These production units are expected to generate lower margins than our historical product mix. And finally, as always our fiscal 2015 EPS and EBITDA guidance provided does not include any additional stock repurchases that we may make pursuant to our share repurchase plan and does not include any other one-time items. Now, let me turn it back to Stan, who will discuss our business in further detail. Stan?

Thanks Mike. Now, let me discuss some of the recent developments in each of the three business segments. Starting with the largest segment, Telecommunications Transmission. This segment is comprised of two product lines, satellite earth stations and over-the-horizon microwave systems. We remain the undisputed leader in the satellite earth station, SCPC modem area, driven primarily by our proven ability to deliver the most bandwidth-efficient modems in high efficiency amplifiers to our end customers. We continue to be excited about our Advanced VSAT product line. These products combine a variety of technologies within our IP portfolio to provide integrated solutions to our customers. By listening closely to our end customers, we’ve focused our technology developments on solutions targeted at markets that have traditionally been served by TDMA. Recently, we have seen TDMA users move away from that technology as customers demand more efficient use of bandwidth, lower latency and higher quality of service. Despite the recent slowdown in satellite earth station bookings, we’ve made and expect to continue to make significant investments in research and development that we believe will result in success. In fact, the next week Satellite 2015 show in Washington D.C. we’ll announce new satellite earth station network product offerings targeted at new growth end markets. I can’t be more specific at this time, but I will elaborate on this on our next conference call expected to occur in June. Some of the new products we’ve introduced in the past, such as our Advanced VSAT, the new network product offerings we are planning to announce next week. It will take little time to establish themselves in the market. At the same time, we are also offering technical services to our customers and expect this to contribute to growth over the next few years. On the U.S. government side of our satellite earth station product line, we are beginning to see some return to normalcy in U.S. government procurement. Recently for example, we’ve seen a substantial increase in proposal activity for government satellite terminal applications and upgrades. One example of an important U.S. government program that will position us in new market areas as the Advanced Time Division Multiple Access Interface Processor or ATIP, which will be developing and manufacturing for the Space and Naval Warfare Systems Command. In February, we announced the receipt of $6.4 million contract extension for the ATIP contract which will be applied to development of an Adaptive Coding Capability significantly improved the Navy's communications system performance. During the second half of fiscal 2015, we expect to ship ATIP production units to the customer, at the same time we will be performing additional entry for this Adaptive Coding. The ATIP contract is our entry into the protected MILSATCOM market, strategically important market for us where there are several sizable opportunities with U.S. Military as well as with U.S. Allies Overseas. As Mike mentioned we believe many of our international satellite earth station customers will continue to face economic headwinds. Nevertheless, we believe we are well positioned to capitalize on market opportunities when economic conditions improve. On the over-the-horizon front, we started the year with a strong base anchored by backlog from programs with our North African end customer. We have a long relationship with this customer and believe that there are additional large opportunities that will materialize in the years ahead. Although, we lowered our revenue expectation for this product line for fiscal 2015, we do believe it’s just a matter of time before these opportunities materialize. Demand for over-the-horizon microwave systems both with U.S. government customers and with new international customers continues to be strong. However, anticipated timing of receipt of potential contract awards for these opportunities is difficult to predict. We also anticipate significant orders for our Modular Tactical Transmissions System or MTTS, the high capacity over-the-horizon microwave system design for easy and rapid deployment. In February, we demonstrated MTTS to the U.S. Army successfully establishing and maintaining 50 megabits per second communication link between two systems separated by over 100 miles. Although it’s difficult to predict timing for these orders, we believe the U.S. government has definitive need for this equipment, we are confident it will generate significant revenues for the product line in fiscal 2016. We are also bidding international opportunities in the Middle East, Australia, Asia, South America and Africa. We are increasingly confident that some of these opportunities will result in substantial contract awards. Timing of contract awards for the over-the-horizon microwave systems are always difficult to predict. However, we nonetheless anticipate we will generate revenue and related operating income from some of these contracts in fiscal 2016. All in all despite year-over-year revenue declines in our Telecommunications Transmission segment I believe our products are second to none that we are positioned to grow over the long-term. Turning now to RF Microwave Amplifiers segment, we’ve received some significantly awards and so far this fiscal year. Strong bookings at the end of fiscal 2014 as well as expected bookings in the second half of fiscal 2015 will provide another year of revenue growth for this segment this year. We recently received U.S. Military orders for traveling wave tube amplifiers for the FAB-T and WIN-T programs. Those plus opportunities we see in tactical communications enabled by our X-Band products should provide a strong base should provide a strong base of U.S. Government related revenues for the next several years. On the commercial side of the TWTA product line, we continue to see broadband high-throughput satellite and direct-to-home TV markets as very exciting growth opportunities for us. We’ve already sold products into most of the large North American and European Ka-band platforms, and are bidding on next-generation platforms with these customers, as well as new opportunities with new customers. The focus area for us is the direct-to-home market which is poised for dramatic growth in the next few years, as broadcasters not only build out new infrastructure to serve new markets and also start replace aged in efficient equipment in their current infrastructure with the high-power, high-efficiency broadband amplifiers necessary for high-definition and ultra high-definition broadcasting. We believe that your product offerings are uniquely positioned, in fact at next week satellite show in Washington we will be officially introducing our new product line, a very high-power TWTAs which will include 1.5 kilowatt and 2 kilowatt TXTA Ku-Band products targeted for this lucrative DBS market. These products will offer significantly performance and cost advantages for our customers by replacing inefficient and expensive Klystron tube amplifiers. On the solid state power amplifier side, business remains good. So far in fiscal 2015 we’ve booked $8.9 million in SSPA orders from international customers. Also in fiscal 2015, we signed a master purchasing agreement with a major domestic OEM for identification friend or foe or IFF solid-state power amplifiers for approximately $6 million. Although, a smaller part of the SSPA business, our commercial product lines serving the aviation and medical communities also continued to do well. During the past year or so, we’ve made significant inroads into the high growth in-flight entertainment and communications market; this market space should be a significant revenue contributor for Comtech over the next several years... As of today, a significant amount of our projected RF microwave amplifier sales for the balance of fiscal 2015 are already in backlog and we see this segment growing significantly. In our third segment Mobile Data Communications, the largest revenue contributor remains our BFT-1 Sustainment work for the U.S. Army, these activities continue to be funded despite ongoing government spending pressures, we believe this is continuing and tangible evidence of the important role our technology plays with the U.S Army. During fiscal 2014, we received two new three-year BFT-1 Sustainment contracts with the combined value of $68.2 million. The first contract, we chosen not to exceed value of $38.2 million, continues our engineering and satellite network operations services. The base period for the services contract is from April 1, 2014 to March 31, 2015, the government has two additional 12-month option periods that can be exercised. The second contract is a continuation of our IP licensing agreement and the associated $10 million annual license fee for the period from April 1, 2014 to March 31, 2015, with two additional 12-month option periods exercisable by the Army. We have been notified by the U.S. Army that they intend to exercise the first option year for both the services and IP licensing contracts before the current term expires at the end of this month. In addition to our Sustainment activities on BFT-1, there are other opportunities we are pursuing, both with the U.S. military as well as international military customers. Although, we are optimistic about some of these opportunities will develop into sizeable orders, but it is difficult to predict timing. Primary goal in the Mobile Data Communications segment continues to be providing the U.S. Army with outstanding support. Doing so, should position us well to participate in next-generation platforms. In fact, we’ve recently responded to two government RFIs seeking technology for future BFT capabilities. Although, we believe that we have uniquely qualified in cost effective solutions to meet customer needs, the current initiative is in its early stages. With that, I would like to proceed to the Q&A part of our conference call. So I will turn it back over to the operator?

[Operator Instructions] Our first question is from Mark Jordan from Noble Financial. Your line is open.

Good morning, everyone and welcome to Stan. First question relative to the revenue short fall that you highlight with the reduced revenue guidance at midpoint, it’s about $35 million. Can you break that down as to how – a rough percentage of the reduction is tied to the modem market versus the tropo?

Mark, without giving specifics is probably fair to assume about 50% to both of the product lines.

Okay and in relative to the tropo – is this all international delays or is there some domestic? I mean we have talked and I think your partner in the MTTS market has looked for some significant shipments. They thought to skew more towards the latter part of this calendar year. So when you look at that of what your assumptions had been, is it all tied to international contracts or had you pushed out of some domestic opportunity?

It’s both it’s with our new international customers for some of these large projects that we’ve been working on for several years. And I think you alluded to it, but our comment with these in February, we tested and demonstrated the MTTS system. So obviously it take sometime for them to go through their process and do what they need to do before we ship. So that is part of the shift in over-the-horizon microwave product line.

Okay, on the modem side you mentioned, excuse me - in dollars, with the strength of the dollar against some currencies at least, especially, the euro have you seen a change in the competitive landscape or you losing any competitive bids because of being dollar-based or are you seeing your customers just deferring purchase as you don’t have effective competition?

So I’d say it’s - we’re not losing things, it’s that people are delaying their capital expenditures because of the problem, whether that’s a short-term or longer term effect who knows because things obviously will keep changing, but I don’t believe it’s because of loss of market share, it's just delays.

Okay. In the marketplace, do you see any effective competition from a non-dollar based competitor?

No nothing different than what’s been the status quo. Obviously, we have competitors in the international markets.

Okay. I guess final question from me relative to the small form factor tripled opportunities you have similar to the MTTS, have you seen an interest and how are you marketing that internationally?

Let’s see how we are marketing. So we have a go to market structure through either direct through end primes or directly to customers in the field obviously we have the sales and marketing organization internally. What I think is most of interest in the tropo is that we are getting the data rates now that become - that make tropo pretty attractive. There is nobody in the world that has that sort of performance ahead of tropo system. So I think that’s going to open up additional markets and additional interest and we’ll go-to-market with that again either directly through primes or integrating larger elements of systems or directly through our sales force.

Okay. Thank you very much.

[Operator Instructions] Our next question is from Tyler Hojo from Sidoti & Company. Your line is open.

Yes, hi good morning. Just firstly, I was hoping we could talk about ATIP a little bit more, in the press release you guys talked about some potential mix issues coming from that contract in Q3. And I’m just trying to clarify has something changed in regards to the profitability on the hardware or is this margin issue in Q3 really predicated on the $6.4 million development contract that you got in that basically running through the P&L?

Really is a mix issue Tyler and simple is that the ATIP contract is structured really in two phases, it’s an NRE development which is cost plus work and obviously we’ve mentioned on past conference calls we are not doing making a lot of money on the NRE. These initial production units that are going out the door are profitable. However, they are not as profitable as our regular satellite earth station modems let say the commercial markets. So what you are seeing is we had lower bookings in Q2 of commercial type products that’s not going to be shipping in Q3 were a large percentage of our regular shipments let’s just say and I don’t even want to say large, but a portion of our mix is going to be these ATIP products which will just be at our lower margins.

Okay, so can you maybe quantify on the hardware side what the differential in margin is, because I know this is going to be even more important contract in fiscal 2016?

I can’t do that, but what I can tell you was that over time as we get out of the initial production units our margin should be higher than what we will do in Q3.

Okay, that’s fair. Okay, I appreciate that and then just a follow-up on the OTHMS conversation, as it relates to the guidance certainly understand kind of push outs in orders, but is there anything anticipated in terms of booking and shipping a new OTHMS order whether would be from North Africa or somebody else embedded in the fiscal 2015 guidance?

I would say smaller orders, but nothing huge.

Okay, got it. And then lastly if I may just a question for Dr. Sloane I understand you are still kind of new on the job and working through your process of learning the Company and really getting situated, but I was just curious if you think anything will potentially change, just in regards the kind of the company’s capital deployment strategy.

So let’s say I have been on the job five weeks, still trying to absorb things, a little bit of a head start from being on the board for few years and know something about the company. So at the moment, I don’t have any plan finalized that I could share with you. Obviously assessing everything, deciding what way we're going to head, but at the moment nothing to tell you.

Okay Fair enough. Thought I would ask though.

Sure.

[Operator Instructions] and we do have a follow-up question from Tyler Hojo from Sidoti & Company. Your line is open.

Yes, actually just one more question. If you have it handy, what's the backlog by segment?

Sure Tyler, our backlog for the quarter was $129.4 million, in our Telecom segment we finished the quarter with $71.4 million, RF amplifiers was $53 million with the remainder being in our Mobile Data Communication segment.

Okay, got it and just in regard to Telecom, I know in the Q you guys indicated that booking for satellite earth stations picked up, I think it was in the month of February. As you sit here, I realize we’re fairly early in March here, but as you sit here in kind of mid-March I mean can you maybe just update that commentary in regards to kind of real-time trends?

I couldn’t update anything better than what we told you, I mean we’ve seen November was the month we first saw the slowdown and certainly that slowdown continued into three months of Q2. We did in the month of February had relatively good bookings and that number did include $5 million of funded orders pursuant to our ATIP contract with the advanced modulation. So we need to March to work its way through and April you know obviously we do think our customers are facing headwinds which is why we’ve adjusted our guidance accordingly. We are expecting bookings to effectively increase at a very, very slow rate for the rest of the year, but we just need to see the second half play its way out.

Yes. Okay, got it. That’s all I had. Thank you. End of Q&A

And there are no further questions at this time.

Thanks again for joining us today. We look forward to speaking with you again in June.

That does conclude today's program. You may now disconnect at any time.