Cohu, Inc. (COHU) Q4 2022 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to Cohu's Fourth Quarter and Full Year 2022 Financial Results Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Jeff Jones, Chief Financial Officer.

Good afternoon, and welcome to our conference call to discuss Cohu's fourth quarter 2022 results and first quarter 2023 outlook. I'm joined today by our President and CEO, Luis Muller. If you need a copy of our earnings release, you may access it from our website at cohu.com or by contacting Cohu Investor Relations. There's also a slide presentation in conjunction with today's call that may be accessed on Cohu's website in the Investor Relations section. Replays of this call will be available via the same page after the call concludes. Now to the safe harbor. During today's call, we will make forward-looking statements reflecting management's current expectations concerning Cohu's future business. These statements are based on current information that we have assessed, but which, by its nature, is subject to rapid and even abrupt changes. We encourage you to review the forward-looking statements section of the slide presentation and the earnings release as well as Cohu's filings with the SEC, including the most recently filed Form 10-K and Form 10-Q. Our comments speak only as of today, February 16, 2023, and Cohu assumes no obligation to update these statements for developments occurring after this call. Finally, during this call, we will discuss certain non-GAAP financial measures. Please refer to our earnings release and slide presentation for reconciliations to the most comparable GAAP measures. Now I'd like to turn the call over to Luis Muller, Cohu's President and CEO. Luis?

Good afternoon, and thanks for joining us. I'll go straight to the key points and let you ask questions at the end. Q4 was an outstanding quarter in terms of financial metrics, albeit typical seasonally slow revenue at year-end. Revenue of $191.1 million was about flat year-over-year with a strong non-GAAP EPS result. More importantly, we continue to make great progress managing costs, growing Cohu's recurring business and selling differentiated products. Fourth quarter non-GAAP gross margin of 48.8% is a Cohu record, reflects 470 basis points growth year-over-year, and it's better than our target financial model at this revenue level. Gross margin benefited from steady growth of Cohu's recurring revenue, where we achieved a 3-year compound annual growth rate of 5.2% through Q4 and represented approximately 45% of fourth quarter revenue with 55% non-GAAP gross margin. In the last 4 quarters, recurring revenue was $338 million, delivering a very profitable and resilient revenue stream through industry cycles. Our recurring business is primarily made up of test interface hardware and device application kits that are IC design-driven and benefit from the introduction of new semiconductor products by our customers. Cohu's test interface annual revenue grew over 9% year-over-year, demonstrating the value differentiation of our solutions when integrated with our testers and handlers. We also established a strategic collaboration agreement in the fourth quarter with CHPT in Taiwan to deliver advanced probe card interface to customers. Under this new collaboration, we plan to accelerate the proliferation of products addressing 5G and advanced node technologies with cost-efficient interface solutions, leveraging the strength of both companies. CHPT intends to contribute with PCB and MEMS probe technology, while Cohu intends to integrate core high-frequency RF and thermal management capabilities. The balance were approximately 45% of our recurring revenue over the last 12 months comes from service revenue generated from an installed base that just further expanded with the acquisition of MCT to over 24,100 actively supported systems at customer sites. Part of our service offer includes a DI-Core data analytics platform. We recently announced that a European IDM customer selected and started deployment of Cohu's predictive maintenance software. This is our first software subscription sale and a major accomplishment for us. This is part of a suite of data analytics products sold under the DI-Core brand to deliver improved productivity to our customers. DI-Core is a key element of Cohu's midterm strategy to increase value services and grow software revenue to between $15 million and $25 million in a few years. Tempering these positives is test cell utilization that we now estimate down 3 points quarter-over-quarter to about 79%, reflecting known ongoing softness in mobility, consumer and computing end markets. Cohu's systems business was 55% of total fourth quarter revenue with 44% non-GAAP gross margin. System revenue distribution in the quarter was notably stronger in automotive and industrial end markets that we have been seeing remain more resilient through this down cycle. Turning to our Semi Test business. Annual revenue was about flat year-over-year, but with a significant diversification out of the mobility segment that was particularly weak in 2022. Our analog and power management sales grew to about 32% of Semi Test business, mostly serving automotive and industrial end markets. Display driver grew from a single-digit percent of revenue in 2021 to approximately 16% of the total Semi Test revenue in 2022. We've had a remarkable year in pivoting revenue to new applications and customer design wins that help build a more sustainable path forward predominantly with the Diamondx platform. On the handler business, we had 5 customer design wins in the fourth quarter with our thermal handlers, 3 of which penetrated unserved production sites of existing customer names. We delivered 2 new systems for silicon carbide semiconductor test and inspection in the fourth quarter. We projected expansion into this customer's new back-end test operation and test subcontractors throughout 2023. Now turning to our recently announced MCT acquisition. We're integrating the business within our test handler unit. MCT brings critical technologies that will help accelerate our product development roadmap to address growing opportunities in advanced packaging panel test. This acquisition also adds a couple of products to Cohu's portfolio and a small revenue stream with gross margins in line with our target financial model. It's a relatively simple business to integrate within Cohu with neutral EPS impact projected for this year and expect it to be accretive after realizing operating synergies. As demonstrated, we have made significant progress towards building a resilient business model that is well suited to weather the cyclicality of semiconductor capital equipment spending. We're very well positioned to continue delivering strong profitability and cash flows quarter-over-quarter. The main focus now is on growth and ensuring our investments and product roadmaps are aligned to secular growth market opportunities. We're also driving hard to deliver wins on the Diamondx test platform, expand our inspection and metrology business and continued expansion of our interface products and DI-Core software. Let me now turn this presentation over to Jeff for additional details on fourth quarter results and first quarter 2023 guidance. Jeff?

Thanks, Luis. Before I walk through the Q4 results and Q1 guidance, please note that my comments that follow, I'll refer to non-GAAP figures. Information about the non-GAAP financial measures, including the GAAP to non-GAAP reconciliations and other disclosures, are included in the accompanying earnings release and investor presentation, which are located on the Investor page of our website. Now turning to the financial results. Cohu again delivered strong revenue and profitability in the quarter. Q4 revenue was $191.1 million and slightly higher than midpoint of our guidance range. Total revenue for full year 2022 was $812.8 million. During the fourth quarter, one customer in the automotive market accounted for more than 10% of sales. For full year 2022, no customer accounted for more than 10% of sales. Gross margin in Q4 set a new record for Cohu at 48.8%, about 180 basis points higher than guidance driven by Cohu's recurring business and differentiated products. Headwinds from cost increases for IC components used on our tester products impacted our gross margin in Q4 by approximately 37 basis points. We expect these challenges to persist at reduced levels into mid-2023 as we increase sourcing directly with semiconductor manufacturers and component availability improves. Full year 2022 gross margin also set a new record for Cohu at 47.2%, which is a 360 basis point improvement year-over-year and tracking to our midterm target of 49%. The headwinds from cost increases for IC components impacted full year 2022 gross margin by approximately 100 basis points. Operating expenses for Q4 were in line with guidance at $52.4 million. Full year 2022 operating expenses were approximately 25.6% of revenue and also tracking to our midterm target. Fourth quarter non-GAAP operating income was 21.4% of revenue, and adjusted EBITDA was 22.2%. Full year operating income was 21.6%, higher than 2021 by 110 basis points. And adjusted EBITDA for 2022 was 23.7%, higher than 2021 by 150 basis points. The non-GAAP effective tax rate for Q4 was approximately 16%, and lower than guidance due to a shift of projected annual pretax income from higher tax rate jurisdictions to lower tax rate jurisdictions. A non-GAAP effective tax rate for full year 2022 and was approximately 20%. Non-GAAP EPS for the fourth quarter was $0.70. The full year 2022 EPS was $2.91. In summary, Q4 profitability was strong as gross margin and adjusted EBITDA continue to expand toward the midterm financial target. Now moving to the balance sheet. Q4 cash flow from operations was strong at $27.6 million. Net of share repurchases totaling $12.6 million, debt repayment of $1 million, capital additions of about $4 million and other changes in working capital. Cash and investments increased quarter-over-quarter by $17 million to $386 million at the end of Q4. Overall, Cohu's balance sheet maintains a strong position to support debt reduction, the share repurchase program and investment opportunities to expand our served markets and technology portfolio in line with our growth strategy. Now moving to our Q1 outlook. We're guiding Q1 revenue to be between $173 million and $187 million. Q1 gross margin is forecasted to be approximately 47.5%, better than the financial target model and down 130 basis points quarter-over-quarter due to lower sales volume and mix. The IC cost component headwinds in the tester business I mentioned earlier will persist, and we're projecting the Q1 impact to be approximately 30 basis points. With a 3-year compound annual growth rate of 5.2%, Cohu's high-margin recurring business provides consistent cash flow through industry cycles. Operating expenses for Q1 are projected to be approximately $53 million, essentially flat quarter-over-quarter. We're projecting Q1 interest expense to be approximately $1 million and offset by interest income of approximately $1 million. We expect Q1 adjusted EBITDA at the midpoint of guidance to be approximately 20%. The Q1 and full year 2023 forecasted non-GAAP tax rate is approximately 20% at the midpoint of guidance. A diluted share count for Q1 is expected to be approximately 48 million shares. And that concludes our prepared remarks. Now we'll open the call to questions.

[Operator Instructions]. Our first question comes from the line of Craig Ellis with B. Riley.

Congratulations on the very strong execution. I wanted to start with a follow-up on gross margin. So great to see that both recurring and systems had a 100 basis point gross margin increase in the quarter. Can you just talk about how much further upside there is from here on each side of the business? And how should we think about your view of where the target should be, given that you're getting so close to that 49% model?

Craig, this is Jeff. Thank you. Yes. So we're still on the path to that 49% gross margin for the full year. We have more contact or in-sourcing to do in the Philippines with additional revenue growth in contactors as well as testers that will improve the overall gross margin as well as growth in inspection and metrology as well as our data analytics software. So we're still on that path, and we expect to achieve that 49% within the midterm.

Okay. Got it. And I'll follow up with a question on backlog and just the level of visibility. So in quarters past, you've often provided some color on what you think the business is capable of in the out quarter. So as you look at 2Q, can you talk about some of the gives and takes? And I think in the past, you talked about the potential for business to rise half on half in the back half of the year. How do you think about prospects for the second half from what you can see today?

Yes. Let me talk a little bit about the backlog here. With extended lead times, we're seeing -- we're -- typically, we'd see 80% plus of the backlog consumed in 2 quarters. We're seeing that elongated a little bit here, Craig. So we're looking at Q1. We've got a strong amount of backlog for Q1 shipments, but then it does also shift into Q2 and Q3. So we're about 50% of backlog rolling into -- Q1 shipments represent about 50% of the backlog. So strong and then that schedules out all the way through the end of the year really. So that's a result of extended lead times.

Yes. Let me add here. I think you're also asking about the second half of the year, right? The way we're seeing this now, Craig, we're expecting the first half to be soft, and I think that's pretty obvious now due to inventory correction in consumer mobility, PC and servers. We tend to agree with statements made recently here by TSMC, also Paradigm that predicted that Q2 is likely the trough in the cycle. And honestly, considering our systems lead times today, which for handlers are about 24 weeks on average and tester is about 12 weeks, we expect that there will be a slow climb from the bottom through the second half of the year. So it's difficult to predict the last quarter of the year like all the way out to Q4, which is typically seasonally down, but it can be also opposite as we're heading into a stronger 2024, but that will be truly depend on the shape of the recovery. So put it all together, we think for the full year, this could be down approximately 10% to 15% year-over-year. And that could be better off -- on the better off side, depending if we can manage to shorten the system lead times to address growing orders to -- and also sort of the recovery profile after we pass the trough. So we'll figure that out, but that's about the view -- best view at the moment for the year.

Got it. That's really helpful, guys. And to just understand that a little bit better, Luis. As you look at backlog, does backlog suggest that the mix of business in the second half would be somewhat similar to the first half? Or does it suggest that there would be more of a resumption in mobility and compute?

No, we really don't get that kind of visibility out of the backlog 3 or 4 quarters from now, Craig. So I just think it's too premature to tell based on backlog.

Yes. Okay. Fair enough. And if I could just ask one more as the last question. Can you just talk a little bit about the probe card initiative, the partnership? When do you expect material revenues from that? And is there any incremental R&D or other investments that you need to make with your partner as you pursue that opportunity?

So starting from the end. No, the investments in R&D are going to stay at the levels that they are now on our interface business. And that partnership is, at this stage, we discussed the mutual collaboration, what they intend to provide, what we intend to provide. We're taking that out to customers gaining some interest at the moment. I think that's going to lead to some evaluations and opportunities that, quite honestly, I would expect to be material in 2024. Less so this year, more initial applications in the lab is that what we're seeing at the moment, but real volume production I would expect in 2024.

Got it. Look forward to seeing that. And congratulations, again, on the great gross margin, guys. Nice work.

Our next question comes from the line of Brian Chin with Stifel.

A few questions. Congratulations on the strong results. Maybe, Luis, one question to lead off here. I think you said 79% test cell utilization in Q4. It sounds something like 800 basis points year-over-year, and yet your revenue is essentially flat year-to-year, even though moderating some in the March quarter outlook. Does seem a lot more resilient than the last cycle. So I'm wondering, from your perspective, what are really the main drivers that account for this revenue resilience? I'd imagine share gains and increased service offerings are part of it, but kind of love to hear your perspective on that.

Yes. Good question, Brian. It really comes out of 2 main threads of business wins here. One is on the interface side. I commented that our revenue for the interface business is up 9% year-over-year despite, as you said, utilization being down. So there has been a number of design wins for our contactors, and frankly, we also saw the number of probe cards still small in the grand scheme of things, but a number of probe cards in 2022. So net-net, an increase in the interface business, which was a key driver of the increase in the overall recurring business. Secondly, on the tester business side, I made a comment that our revenue was essentially flat year-over-year, again, with the backdrop of a test cell utilization coming down. But that tester business has been a big story of pivoting to win new customers outside of mobility. Well, I guess some in mobility is still, but a lot outside of mobility and significantly increasing the fraction of that revenue that's in the analog and power IC test, which we grew to about 32% of the semi test business last year. So kind of that diversification push that we've been doing predominantly with the Diamondx platform, yielding results and sort of bucking that trend of test cell utilization going down.

Great. That's helpful. And then just working through, I think, a question that was just asked a few minutes ago in terms of your commentary on the year. I know you're not giving precise guidance here, but based on the first quarter guide, it sounds like second quarter maybe goes down a little bit something like mid-single digits plus. And then you have some recovery off of that into the back half of the year, maybe kind of mid-single digits, low to mid-single digits, something around that. One is that sort of without giving guidance, is that kind of a framework to use? And then two, in terms of all the mechanics and moving pieces, is this a function of trying to gauge the moderation that you're seeing per your presentation in terms of auto and industrial? Kind of what that recovery looks like for handsets and phones? Are these kind of the key mechanics here that you're looking at?

Yes. I think you hit it all pretty well, pretty accurately there to extend as you can be accurate on a forecast, but that's exactly the logic. You described it pretty well. There is some moderation, particularly in industrial right now. We expect -- We've seen already in Q4 some moderation in automotive. I don't expect it to be dramatically different going forward. And at some point, more of a recovery in the mobility, the handset, but nothing dramatic. And then you factor that in the lead times that I described, right? And there's only so much you can actually do within this year considering the backlog and the lead times we have. So yes, it's kind of looking at progressively down to a trough in Q2, and then in a slow progression recovery in the second half of the year. Now if we do see demand increasing dramatically, we'll certainly work to reduce further the lead time or increase manufacturing capacity to address that. But I think the parameters you described are pretty much the way we're seeing the evolution of this year.

And maybe one last one for Jeff. Maybe just factored into some of the gross margin upside in Q4, but test contactors, you had sort of an improvement plan sort of mid-40s in the year, I think, upper 40s, maybe by sort of mid this year. Are you on track or ahead of schedule there? And then just kind of more holistically, if you -- might be sort of favorable events that kind of really took the gross margins towards 49% this last quarter, but that's at a sub $800 million annualized revenue level. Is it time -- at the $1 billion level into the future, is it time to put maybe a 50% number on that instead of 49%?

We've had that conversation, Brian. I think we're going to hold off for now. We need to string together 3, 4 full quarters here at 48%, 49% gross margin before we -- I think before we can jump into that 50%. But I think Q4 obviously was a fantastic quarter for gross margin. As I said, we had about -- we had a headwind of about 37 basis points. So that 48.8% is net of that. We had strong recurring revenue in the quarter was 45% of total revenue. So it was very strong. In addition to that, we had a good mix, particularly in the tester business unit. So just a really strong quarter. I'd say mix related, but all the business units have really improved in terms of gross margin, handlers, mid-40% -- contactors mid-40%. And then testers are where you'd expect them to be in sort of the high 50s.

Our next question comes from the line of David Duley with Steelhead Securities.

So I was curious if you could just elaborate a little bit more. You mentioned this pivot in your test business towards analog and power IC applications. Could you just talk a little bit about how you're able to accomplish that with the Diamondx? And what some of the major win in markets that are serving these wins? And then would you expect that percentage of the semi test business in these power and analog pieces to be greater than 32% going forward?

Dave, yes, good question. Well, not all of it was outside of mobility, right? We talked about wins in the DDIC, for example, Display Driver IC test, earlier last year. And that was actually [indiscernible] and mobility related, but we also talked about wins in automotive power, microcontroller, our IoT again. To put a little bit different perspective in more by end market, right, I have some data here by end market. The full year result was about -- just for the semi test business, right? The full year revenue profile was about 33% mobility, 25% auto and industrial, 14% computing. And that's for systems only, right? I mean there's another 16% or so that was recurring related for semi test. Where do we expect that to be in the future? I mean, certainly, the areas that we're pushing at right now are more related to analog and power semiconductors, spread across automotive, industrial and computing applications. So naturally, I would expect that to increase because that's our area of focus. Concurrently, though, obviously, if the mobility market starts to recover, we'll see a natural shift of percentage of revenue back into mobility out of our semi test business, right? So it's here really a matter of how -- what's the finding of our new wins in automotive, industrial, computing relative to the recovery timing of mobility. So I can't tell you that necessarily one or the other is going to outrun -- in quarter-to-quarter, you see some fluctuations on that. But all things being equal, as of today, yes, I would expect more growth outside of mobility. That's our focus area.

Okay. And then on -- I think you kind of rounded out expectations for the market or for your company, it's perhaps down 10% or 15% for calendar 2023. I think on the last conference call, you might have been talking, let's say, down 5% or 10%. So you have lowered the expectation a bit. However, I think one of your larger competitors is talking about the business being down perhaps 20% next year. So -- and at the lower end of your range, down 10%, you obviously doubled the performance or be significantly better than their performance. I'm wondering what you think the key reasons are that you might outperform the overall market, and perhaps, the large competitor there?

Well, without knowing exactly who they are, it's hard to compare, but we do have -- okay. We do have a substantial recurring business, right? We talk about this every quarter. It's approximately 45% of our revenue. It's a higher percentage of our combined gross margin, right, about 55% in Q4. It is extremely resilient, and if anything, it has grown last year despite the fact that test cell utilization has gone down as we have managed to grow our interface contactor business. And frankly, we have also increased the number of customers that sign up to service contracts with us, and in a much smaller scale, have increased the revenue of that software product line, DI-Core. So that is a significant difference relative to many of our peers in the industry, right? I'm not going to say all because I can't speak to everyone, but many of our peers in the industry, that resilient, high-margin recurring business. It's quite unique, right? And some people out there talk about their business being entirely consumables, and then they have this incredible fluctuation in revenue of 20% quarter-over-quarter. That's not what we call recurring, right? Our recurring, we'll see a 3% fluctuation quarter-over-quarter. If anything, that fluctuation has been up quarter-over-quarter over the last 4 quarters, despite test cell utilization being down. So it's a true recurring nature business and not just the marketing flare to be used for investor benefit, right? It's a true value, I think, that creates a differentiation that I think answers your question to the core of it.

Okay. One final question for me is, in your presentation, you talked about the gross margins in both pieces of your business, recurring being 55% and systems being 44%. When we think about margins improving throughout the year as you suggested, back up above 49% by the end of the year, will it come from recurring? Or will it come from systems? That's the first part. And then the second part is, as far as systems gross margins go, do you -- can you foresee that 44% getting to, let's say, upper 40s in the next year or two?

Dave, so your last question, yes, driven by growth in the tester systems business. And the recurring will also grow as we continue to grow the contact or the interface business, and that business is a combination of revenue growth, which also supports better leverage of our infrastructure, driving higher margins as well as complementing the more of the insourcing in the Philippines. So it's all of that, to be honest with you.

Our next question comes from the line of Krish Sankar with Cowen and Company.

This is Steven calling on behalf of Krish. Luis, if I could, I wanted to ask a couple of follow-up questions on the recurring revenue business as you described. So if I guess, as you discussed like the -- despite the decline in utilization rates for some of your tools, but then yet your recurring revenues are still very resilient. Is the right way to think about that -- in that you guys are gaining share in the market and hence, able to keep that recurring revenue relatively flattish or just decline slightly? Or is there a different dynamic at play in terms of lower utilization rates allow your customers to actually take advantage of your service contracts? Or if you could explain that, that would be great.

Yes. Yes, Steven. First of all, recurring revenue will fluctuate a little bit with test cell utilization, right? And -- but I really have to underline that a little bit, right? It will go up and down, like I said, about 3 percentage points with test cell utilization fluctuation, but a small fluctuation. So when test cell utilization does go down, typically, you see the recurring revenue go down alongside with it. In this case, it went the opposite direction. And it's not because the customer is taking advantage of anything, it's really because of that increased share penetration of our test interface, our contactor business. And I think an outstanding job by our service manager, business manager sort of increasing the retention rate of customers through contracts in displacement of, in some cases, third-party suppliers, third-party providers and just getting that business back to a OEM-supplied spares, right, and even kits. So that has been a positive, both on the service side of the business as well as in the contactor side of the business that offset the reduction in test cell utilization over the last 4 quarters.

Okay. Great. And then the other, I guess, a smaller component of the recurring revenue just wanted to ask that, is it more software subscription product that you described earlier today? I guess for that newer product service, is that more of a monthly or annual type term for those types of contracts? And relative to your existing installed base, like which part of the test cell installed base do you expect to see strong adoption rates from?

Yes. It is this new product, PdM, Predictive Maintenance. It's an analytics solution that adds on to the insight platform that we're selling through last year. So we introduced PdM here in the fourth quarter as a subscription sale. It's an annual renewal rate. It provides the analytics so that you can improve your overall equipment efficiency or utilization of your cells. It's all part of the DI-Core umbrella. So it's all part of the plan that we have had to increase revenue in that area. It's -- like I said -- we said in the past, it's about a $1 million revenue stream last year. Obviously, significant growth year-over-year because it came off from a few hundred thousand in 2021. We see an opportunity here in aggregate to get to about $25 million, $30 million, $35 million in revenue over the years in the software space on sort of addressing our installed base of equipment. For starters, we're really working on our test handlers. These are the electromechanical systems. These are the ones that demand more maintenance, more repair over time and the ones that you can have a greater opportunity to repair optimization of OEE for our customers. So that's where the real value is.

Our next question comes from the line of Trevor [indiscernible] with Needham.

This is Trevor on for Quinn. So last May at the Analyst Day, you changed the time frame of the target model from 3 to 5 years to 2024, but the new January investor presentation shows 3 to 5 years again. And given the macro, this is very understandable, of course, but I just wanted to double check if you're reverting back to that time frame. And if that's the case, it seems likely that gross margins could be 50% plus. Is that the right way of thinking about it?

Yes, that's right, Trevor. And that's possible 50% plus, but we'll intercept it likely beforehand or when the 49% is achieved so that we can reset the targets. We're not going to wait for some time to elapse. It's a matter of when we achieve it, then we'll set the bar higher.

Okay. Makes sense. And so you spoke about shipping to silicon carbide systems to a customer. Did any new silicon carbide opportunities come about in the fourth quarter?

No. We talked about it in the third quarter about the same opportunity, and we're talking about the same thing we did a quarter ago.

Okay. Okay. And can you remind us or able to quantify what that opportunity is or a percentage of current revenue to give us an idea?

We think that singular customer opportunity can be about $30 million spread over 2 years, and we're still trying to see how much of that is going to materialize this year versus next year, but it is ramping -- starting to ramp.

Okay. And sorry if I missed this point, but last -- so last quarter, you gave an estimate that test and inspection market could be down mid-single digits in 2023. Has this figure changed at all?

No. Still the same view. We view the market as a whole was probably on the order of $500 million or at least a portion of the market that we expect to serve, and we think that could be going down to about $450 million in 2023.

That concludes today's question-and-answer session. I'd like to turn the call back to Jeff Jones for closing remarks.

Okay. So before we sign off, I just want to thank everybody for joining today's call. Have a nice day, and we'll talk to you soon.

This concludes today's conference call. Thank you for participating. You may now disconnect.